As a business leader, you understand that products are not meant to last forever, yet their management throughout their lifecycle can significantly impact your bottom line.
Product Lifecycle Management (PLM) is a strategic approach that involves managing all the information, people, and processes involved throughout a product's life. Specifically, the product lifecycle includes:
- Development & launch
- Growth
- Maturity
- Decline
The initial stage is when the new product is designed, developed, and put on the market. At this stage, your expenses will be high, but your revenues will be quite low. Consumers are not aware of your product and its values and features.
During the growth stage, more consumers learn about your product. To reach a larger audience, it is important to have effective marketing techniques, rely on word of mouth, and establish strong distribution channels. Once you start making more sales, it’s possible to launch new variations of your new product.
Amid maturity, growth begins to slow down as you make fewer sales. Your product has been out for some time, and customers have already adopted it. Various external factors complicate growth as a combination of potential issues emerges:
- Intensified competition
- Market saturation
- Lack of interested new customer segments
- Price wars
- Competitive product differentiation
- Targeted marketing
Lastly, almost every product will reach the decline stage. This is when sales start to decrease, and your product becomes outdated or less relevant. You may choose to discontinue the product or to reinvest in it while finding niche markets to sell it on.
Product life cycles: an overgeneralization?
The product lifecycle management process is very specifically laid out. It’s important to remember that not all products follow a similar linear trajectory. Some products, for example, don’t decline as they are never irrelevant to the consumers buying them.
Likewise, different products will stay in different stages of the product lifecycle for different periods of time. In any case, these time periods can vary considerably due to external factors:
- Market dynamics
- Your competition (or lack of competition)
- The course of technological innovation
Pricing through product lifecycles
Product lifecycle management can put complicating pressures on your budget. But at different phases of the product lifecycle, different pricing approaches will make more sense.
Many businesses will take a competitive cost-based pricing approach during the development phase. After all, if you’re releasing a new product onto the market, you need market penetration one way or another. So, you could take a penetration pricing approach and set an unprofitably low price at the start to gain market share.
However, there is never a “one size fits all” approach to any aspect of pricing strategy.
As businesses enter the growth phase, there are new opportunities to take advantage of. It’s at this point that prestige pricing and promotional strategies can be leveraged to maximum effect.
Product portfolio optimization
Product portfolio optimization is the process of strategically mixing the products or services your business offers. It helps ensure you don’t waste resources on underperforming products late in their life cycles. Instead, you direct those products toward initiatives that support your business goals and profitability.
We provide assessments of product portfolios to identify new opportunities. This involves analyzing each product’s performance in:
- Sales
- Profitability
- Market share
- Customer demand
- Other relevant metrics
With this data, you know how each product contributes to or detracts from your overall portfolio.
During the course of product portfolio optimization, there are four common types of high-growth and high-margin opportunities for businesses to discover.
Product extensions
During the growth and maturity cycles, you can identify opportunities to optimize your product portfolios. One such opportunity is product extensions.
This self-explanatory tactic requires you to identify opportunities to extend your existing products by adding new features, variations, complementary offerings and bundling.
Product extensions can enhance the value and usability of middle-stage products. This may help you improve your sales and extend the lifecycle of a product.
Product enhancements
Similarly, there may be opportunities for product enhancements to:
- Expand the product lifecycle
- Address customer needs
- Differentiate your product from competitors
- Capitalize on emerging trends
Product enhancements can include upgrades to the functionality or even simple design changes. They must be data-driven choices that somehow improve the user experience.
New products
At Simon-Kucher, we provide guidance on identifying and filling gaps in your product portfolio. In many cases, new offerings are the key to addressing unmet customer needs. They can also help you target untapped new market segments.
Additionally, launching complementary products that align with your company’s strategic objectives can help you address several business goals at once, including product lifecycle management challenges.
Rationalization of product offerings
You must determine whether any products are underperforming or redundant. To that end, we often recommend rationalizing product offerings by:
- Discontinuing low-performing products
- Phasing out expired products
- Consolidating overlapping products
- Divesting non-core assets
This step streamlines your product portfolio, reduces complexity, and gives you more time to focus on better opportunities.
Value-based pricing
Prices must change as the product lifecycle changes. Each step of product lifecycle management implies different value propositions for customers, and different customer segments will also perceive the shifting value differently.
By understanding how customers perceive the value of your product and its features, you can align your pricing with the customer’s willingness to pay. Value-based pricing is the more profitable alternative to setting your costs based on your own margins and expenses.
Value-based product pricing must be dynamic, especially when you’re talking about a product lifecycle. Because the product’s perceived value will change over the product lifecycle, you need to be ready to adjust to their shifting perceptions.
This requires ongoing analysis and a dynamic pricing strategy that enables you to capitalize on profitable opportunities.
Sales and marketing through the product lifecycle
Sales and marketing strategies represent another dynamic part of product lifecycle management. Each phase of the lifecycle demands a different marketing and sales approach.
The first thing to remember is the importance of customer segmentation research. You want to target specific customer segments with each product at different parts of the cycle. You then adapt your messaging and brand positioning to address evolving market needs.
Next, you must optimize your promotional activities and strategically drive demand. Marketing and sales activities must be integrated with portfolio optimization and shifting product lifecycles. In this way, you capitalize on emerging opportunities and adapt to emerging challenges as your products go through their lifecycles.
Optimizing distribution channels
Distribution channels can be leveraged to maximize reach and efficiency throughout the product lifecycle. Research-based multi-channel strategies add another dimension that maximizes the reach and efficiency of your product lifecycle management.
Taking advantage of distribution channels for better lifecycle management involves:
- Identifying promising channels
- Evaluating channel performance
- Negotiating channel partner agreements
- Implementing channel incentives
- Driving sales
Assess your product lifecycle management with Simon-Kucher
At Simon-Kucher, we can help you assess or develop your product lifecycle management strategy. We offer consumer, product, and market analysis for you to achieve the right commercial strategy and maximize the profitability of your products.
Contact us today to build the right products for the right customers.
